Mobile financial services like M-Pesa are often cited as the solution to financial exclusion. The runaway success of the Kenyan-built money transfer service has inspired hundreds of imitators around the world, and led to predictions that we might soon see the 2.5 billion people who are “unbanked” join the formal financial system.
Well, not yet. The reality of many of these mobile services is less happy than you might hope according to a new report from the Consultative Group to Assist the Poor (CGAP), a Washington D.C. group that specializes in financial exclusion. It says many services launched in the wake of M-Pesa have “stagnated from lack of use,” with inactivity rates as high as “80 or even 90 percent” in some cases.
The reason isn’t that the services are bad or don’t work properly, it says. It’s something more subtle. It’s that they weren’t designed with humans in mind, specifically poor humans in particular markets. “For the most part, providers weren’t launching products or services based on well-defined insights about clients in their market,” says the report. “A good number of providers were going to market with one-size fits-all mobile money solutions that customers struggled to understand and to use.”
To correct this problem, CGAP advocates a “human centered design” approach that’s now conventional wisdom in many industries, but still apparently foreign to finance. The report argues that “talking in depth to target customers,” and observing how real people use money in their lives, would help fine-tune the services and make them more attractive.
To you or I “saving” might mean putting money in the bank for some unforeseen purpose. To the unbanked, it may mean putting money away for a particular goal, spending responsibly (Brazil), or paying steep fees for a “susu” to come collect money each week (Ghana).
In places where systems of recourse are limited, people worry about being scammed by service providers like banks. Therefore, they’re more likely to trust other people like themselves. Says the report: “Although people are acutely aware of the shortcomings of informal services, like savings groups, they are more tolerant of them. One reason is that they know who to confront if something goes wrong. They don’t feel nearly as comfortable doing that with formal organizations.”
In poor places, money circulates locally. “Low-income people feel more comfortable investing in their communities and their neighbors, because they know they will have a built-in support system in their own time of need,” the report says.
Using new technology is a disorientating experience for the poor, says CGAP, especially the elderly. In one example from Pakistan, illiterate beneficiaries of a social program “struggled even to input a set of numbers into a phone, since in Urdu, numbers and letters are read from right to left, not left to right.”
Poor communities learn through word-of-mouth, rather than individually through external sources. “The intergenerational nature of communities.. means that wisdom is shared down and technological and cultural information is shared up,” the report says. “For the unbanked and the poor, older generations rely on their younger relatives to carry out financial or mobile transactions.”
CGAP suggests financial groups “design for trust,” “offer limits not temptations” (that is, encourage saving, not gratuitous outlays), and help people save for particular goals, not just for the sake of it. But it also says design isn’t everything. Mobile money systems also need strong agent networks to exchange cash in and out, and companies that participate in taking payments. Human centered design isn’t a silver bullet–but done genuinely, it’s a helpful way to see customers as they really are, not what they are imagined to be.